2015 (4) TMI 437

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....eal before us and has raised the following effective grounds;- 1. Ld. CIT (A) erred in law and in facts in confirming action of AO in disallowing Rs. 3,42,128/-, being weight shortage expenses by simply following appellate order of A.Y. 2007/08 without granting opportunity of hearing to the appellant as well ignoring the submissions on record. Ld. CIT (A) ought to have independently adjudicated the issue rather than relying on earlier appellate order for confirming disallowance. 2. Ld. CIT (A) erred in law and in facts confirming disallowance made by AO of Rs. 1,02,007/- by invoking provisions of section 14A r.w. rule 8D of the Act. Both the lower authorities erred in ignoring the fact that the appellant had sufficient own funds to invest in tax free dividend earning investment. Ld. CIT (A) ought to have deleted such disproportionate disallowance of expense for earning dividend income of Rs. 20, 498/-. Ground no. 1 is with respect to disallowance of Rs. 3,42,128/- as weight shortage expenses. 4. During the course of assessment proceedings, A.O noticed that Assessee has claimed weight shortage expenses of Rs. 3,42,128/-. A.O noted that no evidence was produced before him to supp....

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....The ld. D.R. on the other hand supported the order of A.O and ld. CIT(A). 7. We have heard the rival submissions and perused the material on record. We find that the claim of weight shortage expenses was disallowed by the A.O and the disallowance was confirmed by ld. CIT(A) by following his predecessor order for A.Y. 07-08. Against the order of CIT(A) for A.Y. 07- 08, Assessee had preferred appeal before Hon'ble ITAT. We find that the Co-ordinate Bench of Tribunal in ITA NO. 1008/AHD/2011 for A.Y. 07-08 (order dated 04.04.2014) decided the issue in favour of Assessee by holding as under:- 1. Learned CIT(A) has erred in law and in facts in confirming action of AO in disallowing Rs. 5,38,121/-, being weight shortage expenses. Both the lower authorities erred in ignoring the evidences produced by the appellant in the form of correspondences with the parties and debit notes issued by the parties. Ld. CIT(A) ought to have deleted the disallowance. 3. Apropos to ground No.l, the Id.counsel for the assessee submitted that the assessee is engaged in trading of ready cotton bales since last more than 21 years and the debit notes were raised by the concerned parties. The Id.counsel for th....

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....t of Rs. 11.13 lacs and had taken loans of Rs. 3.07 crore on which interest of Rs. 5.48 lacs was paid by the Assessee. A.O therefore asked the Assessee to show cause as to why no disallowance u/s. 14A be made to which Assessee interalia submitted that the investments were made out of free reserves of the company and no interest bearing funds have been used by the Assessee. The submission of the Assessee was not found acceptable to the A.O for the reasons that Assessee had not submitted proof of availability of interest free funds on the date of investments and the investment activity of the Assessee was on indivisible activity and Assessee had also not proved about non incurring of interest expenditure of earning exempt income. He therefore following the formula prescribed under Rule 8D worked out the disallowance of Rs. 1,02,007/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who upheld the order of A.O by holding as under:- 4.1Identical issue arose in the immediately preceding A.Y. 2007-08. Vide order dated 09.02.2011 in appeal No. CIT(A)-VI/DCIT.Cir.1/415/09-10, my predecessor held as under:- 4.3. 1 have considered the facts of the case anfi assess....

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..... and Marketing Fed. Ltd. in (ITA No. 548/Chd/2011) and Delhi Tribunal in the case of Sahara India Financial Corporation Ltd. vs. DCIT (2014) 41 Taxman.com. 251 (Del) for the proposition that disallowance u/s. 14A cannot exceed the exempt dividend income. She therefore submitted that considering the totality of the facts no addition u/s. 14A was called for. However as an alternative she submitted that a token disallowance as felt appropriate by the Tribunal be made on account of administrative expenses which would take care of disallowance u/s. 14A as the year involved is A.Y. 08-09. The ld. D.R. on the other hand submitted that A.O was fully justified in disallowing the expenses in view of the fact that rule 8D is applicable from A.Y. 08-09. He thus supported the order of A.O and CIT(A). 12. We have heard the rival submissions and perused the material on record. On perusing the Balance sheet, we find that there is no change in investments at the year under as at 31st March, 2007 and as at 31st March 2008 meaning thereby that prima facie no new investments have been made by the Assessee during the year. Further on perusing the Balances sheet as at 31st March 2008 we find that the ....